1. Regional Resilience and the Recalibration of Automotive Industry Labour Relations in the Great Lakes Region John Holmes Queen’s University Kingston, Ontario Toronto-Torino Workshop Resurrection or Reinvention: Industrial Resilience in Traditional Manufacturing Regions Collegio Carlo Alberto, Torino, Italy, November, 2016

2. Advanced Auto Manufacturing: Two Distinct Activities
Auto manufacturing – advanced process utilizing robotics, computer systems, complex sequencing and logistics
investment influenced by competitiveness factors: relative cost of labour, energy, logistics and other inputs; trade agreements; government financial incentives; etc.
Auto product engineering and R&D – process of inventing, testing, integrating and optimizing new products and services
dependent on regional ‘innovation ecosystem’: engineering talent, research alliances, IP policies, R&D tax credits and other state support for company based innovation, etc.

3. My focus is:
on auto manufacturing NOT product engineering and R&D
on regional ‘resurrection’ NOT regional ‘reinvention’
NOT on the ability of Ontario (or the GLR) to reinvent itself as ’the anchor for new industries’
The paper IS about:
How automotive manufacturing remains resilient in the GLR (ON, NY,MI,OH,IN,IL,WI) as the result of the transformation, over the last decade, of automotive labour relations - one of the region’s key institutional pillars

4. Objectives
Demonstrate how collective bargaining can reshape ‘regional institutional contexts’ and, thus, influence regional resilience
Importance of transformational labour agreements, bargained over the last decade between unions and the D-3, for the ongoing regional resilience of auto manufacturing in the Great Lakes Region – the traditional heartland of North American auto making
Document the 2016 Unifor-D-3 negotiations in Canada and assess the impact of the outcomes on the competitive position of the Ontario auto industry within the Great Lakes Region and beyond

5. Ontario Automotive Industry
Structure
10 OEM assembly plants – GM, Ford, FCA, Toyota, Honda
600+ supplier plants (various tiers; stampings, engine parts, plastic parts, tooling important)
Production rationalized and integrated with US under1965 Auto Pact (later CUSFTA and NAFTA)
reliant on US market for over 90% of vehicle and parts exports
highly integrated into Great Lakes Region
At 1999 peak, produced 3 million vehicles, contributed 22% of manufacturing shipments, $83.5 billion in exports and 150,000 jobs
17% of NA vehicle production vs. 10% sales

6. 2016: Pivotal Moment for the Ontario Auto Industry
Paramount issue: securing new OEM assembly investment
net loss of 4 vehicle assembly plants since 2000
: 3.5 million units of new assembly capacity added to NA auto industry – Canada received only 3%
Uncertain future for: GM Oshawa Assembly Plant; FCA Brampton Assembly Plant; and Ford Windsor Engine Facilities
Ontario’s eroding competitive cost calculus since 2000
value of $CAN against $US
cost of electricity and government mandated payroll taxes, carbon pricing, new pension scheme
transformational labour agreements in US
Ontario’s Competitiveness for Auto Manufacturing
Competitiveness of GLR vs. US South vs. Mexico (for NA investment)
Competitiveness of Ontario within the GLR

7. North American Vehicle Production
Source: Automotive News March 31, 2014

8. Automotive Resilience in the Great Lakes Region
Less dominant than 30 years ago BUT
Auto manufacturing
Still employs over 500,000 workers and accounts for
60% of NA light vehicle production
72% of transmissions
52% of engines
50% of US suppliers and 90% Canadian suppliers
US$33.6 billion in new investment
Auto Product Engineering and R&D (Michigan)
over 400 automotive R&D centres
8 of 10 largest automakers
46 of top 50 suppliers

9. Labour Relations and Regional Resilience
Role of labour as an actor and labour relations rarely addressed in GPN and regional resilience literature
Potential pivotal role for collective bargaining
securing new investment
reshaping ‘regional institutional context’ i.e. labour relations, employment relationship and workplace governance, etc.
regional competitiveness and resilience

10. Labour Relations Systems
Cross-national standardization of ‘hard’ production technologies
Advanced manufacturing technologies
Frequent redesign of production lines/model changeovers
Global reach of automakers
But, cross-national variation in ‘soft’ technologies (LR/HRM)
Corporate work system templates and LR/HRM practices must be ‘translated’ and modified (‘hybridized’) to mesh with national and local systems of industrial relations and work cultures

11. Auto Industrial Relations in US and Canada
1940s : UAW represented US and Canadian autoworkers
system of “pattern and connective” collective bargaining
highly uniform pattern of wages/benefits/work rules
US and Canadian bargaining synchronized - pattern set by US
Post 1985:
CAW (Unifor since 2013) split from UAW over Canadian
resistance to concessions in early ‘80s
ideological rejection of profit sharing and cooperation
US/Canada divergence in content of collective agreements
pattern remains in Canada but breaks down in US
union power weakened by growth of non-union segments in both assembly and parts

12. Two Waves of Concession Bargaining
First wave (1980s)
viewed as temporary and extraordinary
wage increases traded off against job security
steady downward pressure on union density – UAW lost almost 1 million members
weakened unions ability to resist
Second Wave (2000’s) - Ultra-concessionary bargaining
more confrontational employer bargaining stance
overriding of constitutional labour rights by the state
permanent large cuts to wages and benefits
reset labour costs and labour relations in the GLR

13. Year UAW (United States) CAW (Canada)
2005
UAW- D-3 CA reopened
large workforce reduction
health benefit concessions
2005 CAW-D3 CA
resisted concessions
modest base wage rate increases
UAW- Delphi ‘ultra’ concessions
24 plants and 24,000 workers cut
all new-hires made second tier with 50% lower wage
2007
UAW - D-3 CA
two-tier wage and benefit structure for ‘non- core’ new-hires
VEBAs removed cost of employee and retiree medical benefits from company books
overall cost of a new-hire cut by 33%
2008
CAW-D-3 opened CA early
freeze on base wages and COLA
one-time “bonus”
reduced pension benefit
new-hire grow-in system wage:70% to 100% over 3 years
lump sum

14. UAW (United States) CAW (Canada)
Year
UAW (United States)
CAW (Canada)
2009
UAW-D CA reopened GM/Chrysler Bailout
Government forced lower labour cost to match Toyota
permanent second-tier wages extended to all new-hires
base wage rates frozen
COLA suspended
reduced paid-time off
Job Banks program suspended
hourly employment reduced 50% compared to 2005
12 assembly and power train plants closed
no strike allowed for 6 years
CAW-D CA reopened
GM/Chrysler Bailout
Government forced lower labour cost to match Toyota
base wage rates remain frozen
limits on SUB program
reduced supplementary medical benefits
hourly employment reduced by 50% compared to 2005
3 assembly and power train plants closed
2011
UAW-D-3 CA
base wage rates and COLA frozen
new-hires: permanent two-tier remains but modest increase in wage rate : top of Tier 2 $19.28/hour vs. $28.50 Tier 1
2012
CAW-D-3 CA
base wage rates frozen, COLA suspended
one time bonuses
new-hires: 60%-100% over 10 years; hybrid pension

15. D-3 New-Hires in the US: 2011-2015
Source: CAR 2015

16. GLR Automotive Manufacturing Resilience
Labour costs significantly lowered by these rounds of concessions
direct labour costs halved as % of total vehicle production costs
OEMs brought work back in-house due to two-tier structure of new-hires
cost gap with new domestic OEMs closed significantly
D-3 plants working at or above rated assembly capacity
enabled GLR to capture new NA investment and ‘resurrect’ auto manufacturing in the region
But at a real cost to workers – raises critical questions of resiliency for whom and under what conditions?

17. Context for 2016 Unifor-D-3 Negotiations
Bargaining Objectives
Unifor: secure new investment for threatened plants – strike demand
GM and FCA: close all-in labour cost differential with US
Market Conditions: record levels of sales and production
Weakened Canadian $: 2012 at par, 2016 mid 70 cent range
Governments: signalled open to providing financial assistance to secure new investment
2015 UAW-D-3 CA
significant new investment
base wage gains (first in 9 years)
permanent two-tier changed to 8 year grow-in for new-hires
use of temporary workers expanded

18. Outcome: Economic Pattern
Order of bargaining: GM, FCA, Ford
Economic Pattern:
2% base wage increase in yrs. 1 and 3; COLA suspended
$2,000 lump sums in yrs. 2 and 4 and $6,000 signing bonus
10 year grow-in for new-hires remains but with some improvement
New-hire pension: hybrid DB/DC replaced by a DC plan
Strong rank and file opposition at FCA and Ford Oakville over failure to reduce new-hire grow-in
Contracts ratified by historically narrow margins

19. Outcome: New InvestmentGM
$400 m. for Oshawa Flex Assembly Plant (truck module)
$150 m. for St. Catharines Engine Plant
FCA
$325m. for Brampton Assembly Plant (paint shop rebuild)
$6.3m. for Etobicoke Casting Plant (new dies and tooling)
Windsor Assembly secures WCM Gold status (recent $2.6b.)
Ford
$613m. for Windsor Engine Operations
$100m. For Oakville Assembly (model ‘refresh’ and exports)

20. Assessment
Unifor appeared to achieve its prime objective but questions remain about investment commitments
Companies held the line on labour costs
Union couldn’t reduce the 10 yr. grow-in for new-hires – if not now, given current market conditions, then when?
Economic pattern once again maintained across companies in Canada but really strained solidarity within union
Represented a real departure for the union – bargaining investment as prime demand

21. Summary
Role of labour as an actor is rarely addressed in GPN and regional resilience analyses
Collective bargaining can reshape ‘regional institutional contexts’ and influence regional resilience
GLR remains resilient for both auto manufacturing and auto engineering R&D
Ontario: D-3 footprint (mainly) secured and labour costs competitive within GLR

22. But, then of course there is Mr. Trump!
“I've seen the future, brother: it is murder”
from “The Future” (1992) by
Leonard Cohen
Canadian Poet, Artist, Singer
Sept. 21, 1934 – Nov. 7, 2016